LawRex.com - Lawyer to Lawyer Referrals

COMMITTEE ON ATTORNEY ADVERTISING

APPOINTED BY THE NEW JERSEY SUPREME COURT

OPINION 36

Internet Advertising and Disclaiming

Impermissible Lawyer Referral Service?

The inquiring attorney asks whether listing the attorney's web page on a web site run by a private commercial advertising and marketing enterprise, where the attorney pays a flat fee for the listing and receives an exclusive listing for a particular county in a specific practice area - in this case criminal law - is permissible under the Rules of Professional Conduct.

The starting point for analyzing this type of inquiry is Opinions 6, 13 and 13 (Supplement) of this Committee, which contain detailed discussion of the obligations of lawyers utilizing private commercial advertising, marketing or referral services, or combinations of such activities. The activity proposed by this inquiry is fundamentally advertising and marketing, and as such is controlled by the strictures of RPC 7.1 and 7.2. As we said in Opinion 13:

In particular, we note that an attorney may not, by advertising through a consortium, collective, or any other kind of group or association, be involved in any kind of advertising activity which would be prohibited if the attorney advertised directly. Cf. Opinion 8, 127 N.J.L.J. 753 (1991). An attorney remains responsible for the ethical propriety of all advertising with which he or she has any connection or involvement.

Opinion 13, 132 N.J.L.J. 267 (October 5,1992) and 1 N.J.L. 1588 (October 12, 1992).

As stressed in these earlier opinions, frequently advertising or marketing services cross the line and become a form of lawyer referral service, invoking additional scrutiny under RPC 7.3(d) and (e):

In RPC 7, 3(d), a lawyer is barred from giving compensation or anything of value “to a person or organization to recommend or secure the lawyer's employment by a client,” except that a lawyer “may pay for public communications permitted by RPC 71,” and “usual and reasonable fees or dues charged by a lawyer feral service operated, sponsored, or approved by a bar association.” In a parallel vein, RPC 7.3(e)(3) exempts from a general prohibition on allowing others to promote the use of the lawyer's services “a lawyer referral service operated, sponsored, or approved by a bar association.”

Id.

When advertising is done through a vehicle which is not explicitly referenced as an advertisement, and is not readily known to consumers as a place of pure advertising (as, for example, the Yellow Pages would be), there is a possibility that the presentation and language could lead a reasonably informed consumer to believe that the listing has some sort of professional or authoritative imprimatur, as a kind of endorsement, such as an authorized lawyer referral service might give (e.g., a web page presented as “anti-trust lawyers.com,” as a hypothetical). Such a presentation could, intentionally or inadvertently, thus mislead consumers into believing it was other or more than simply a paid advertisement, and carried greater weight. Such a consequence would appear more likely when only a very limited number of lawyers are listed for a particular geographical, subject matter or other defined area.

To forestall such a possibility, we conclude that a lawyer who seeks to give anything of value in order to participate in such a listing must, before doing so, ensure that the listing or advertisement contains a prominently and unmistakably displayed disclaimer, in a presentation at least equal to the largest and most prominent font and type on the site, declaring that “all attorney listings are a paid attorney advertisement, and do not in any way constitute a referral or endorsement by an approved or authorized lawyer referral service.” With such disclosure, the proposed activity is permissible, as long as it otherwise complies with RPC 7.1 and 7.2, as noted above.

Do the Texas Disciplinary Rules of Professional Conduct permit a lawyer to participate in a federal
government program that negotiates contracts with lawyers to provide legal services to federal
agencies and then recommends or refers those lawyers to the federal agencies, where the program is
not certified as a lawyer referral service under Texas law and the lawyer is required to pay to the
program one percent of the legal fees earned through the program to be used for paying the costs of
operating the program?

A federal program (the "Federal Program") of the General Services Administration (the "GSA"), and
agency of the Executive Branch of the United States Government, provides to other departments and
agencies of the Executive Branch of the United States Government ("Federal Agencies") a schedule of
pre-negotiated contracts for goods and services, including legal services. An office of the GSA, the
Federal Supply Service (the "FSS") solicits the bids and awards the contracts. The FSS then
recommends or refers the providers to Federal Agencies by placing these contracts on a "schedule"
from which Federal Agencies may select the service provider, in this case a lawyer, at a substantially
reduced cost. A federal agency is not required to select a lawyer from this schedule but is free to
independently hire counsel not on the schedule.

The Federal Program's costs are paid by charging each participating provider a fee of one percent of
the fees earned by the provider through the program. Thus, a lawyer who bids under the Federal
Program to participate on a schedule contract to provide legal services to Federal Agencies would be
obligated to pay the FSS one percent of the legal fees thereby earned if the lawyer is selected by a
Federal Agency to provide legal services under the schedule contract.

The FSS has not sought to have the Federal Program certified as a lawyer referral service under
Texas law.

The Committee believes that the Federal Program should properly be viewed as a program involving
a single entity, the Executive Branch of the United States Government, under which one part of the
entity (the FSS) assists other parts of the entity (the Federal Agencies) in obtaining legal services under
the schedule contracts. This opinion applies only in the case of legal services provided to Federal
Agencies and the Committee expresses no opinion as to a Texas lawyer's participation in the Federal
Program to the extent that services are provided to agencies or entities that are not included within the
definition of "Federal Agencies" set forth above.

Rule 5.04(a) of the Texas Disciplinary Rules of Professional Conduct generally prohibits a lawyer or
law firm from sharing or promising to share legal fees with a non-lawyer. However, as Comment 3 to
Rule 5.04 explains, "[r]eimbursement by a lawyer made to bona fide or pro bono legal services entity
for its reasonable expenses in connection with the matter referred to or being handled by the lawyer"
does not constitute a prohibited division of legal fees. Nor would the negotiation with a client of a
discount on legal fees constitute a prohibited division of legal fees. This is true regardless of whether
the discount is applied before legal fees are paid by the client or is applied after legal fees are paid by
the client so that the discount is paid back to the client. This is also true regardless of whether the
discount is in the form of a fixed amount, a reduced hourly rate, or a percentage of the entire fee. Since
the one percent fee paid to the FSS under the Federal Program with respect to services to Federal
Agencies should properly be viewed as an agreed reduction in fees negotiated with a client, the
lawyer's payment of the one percent fee under the Federal Program with respect to services to Federal
Agencies is not prohibited by Rule 5.04(a). Likewise, since the Federal Program is properly viewed as
involving a negotiated reduction in fees, a Texas lawyer's participation in the Federal Program does not
result in a violation of Rule 7.03(c) (which with limited exceptions prohibits a lawyer from making or
offering payments to a prospective client or other person in order to solicit professional employment).

Rule 7.03(b) of the Texas Disciplinary Rules of Professional Conduct generally prohibits a lawyer
from paying a non-lawyer for referring clients or prospective clients to the lawyer. That Rule states in
pertinent part that

The purpose of this rule is to prohibit a lawyer from circumventing the disciplinary rules on improper
solicitation by hiring a non-lawyer to do the actual solicitation, a course of conduct that is considered
against the best interest both the public and the legal profession. See Comment 3 to Rule 7.03.

One exception to the general prohibition of Rule 7.03(b) on payments for referrals exists for payments
of "the usual charges of a lawyer referral service that meets the requirements of" chapter 952 of subtitle
B of title 5 of the Texas Occupations Code, which is known as the Texas Lawyer Referral Service
Quality Assurance Act (the "Texas Lawyer Referral Act"). The Texas Lawyer Referral Act creates a
licensing scheme for any service or program that refers potential clients to lawyers regardless of
whether the program or service characterizes itself as a "referral service" and specifically prohibits the
operation of a lawyer referral service in Texas unless the service holds a certificate issued under the
Texas Lawyer Referral Act. See Texas Occupations Code Sections 952.002 and 952.101. To obtain a
certificate under the Texas Lawyer Referral Act, a referral service must be operated by a governmental
entity or a tax-exempt non-profit entity and the service must meet a number of requirements, including
the establishment of "specific subject matter panels" and a limitation to $20 on the fee for a first
consultation with a participating lawyer. See Texas Occupations Code sections 952.102, 952.154, and
952.155.

In the circumstances presented, the Federal Program does not hold a certificate under the Texas
Lawyer Referral Act to operate a lawyer referral service. However, the Committee believes that, without
regard to whether the Federal Program holds a certificate under the Texas Lawyer Referral Act, the
Federal Program does not involve conduct that violates Rule 7.03(b). The FSS is a part of the United
States Government which recommends and negotiates for legal services for other parts of the
Executive Branch of the United States Government. The actions of the FSS under the Federal Program
are thus properly viewed as actions by the United States Government to evaluate, negotiate with, and
recommend lawyers on behalf of itself or divisions of itself or groups within itself. Accordingly, for
purposes of applying Rule 7.03(b), the Federal Program involves negotiation by a client entity of the
terms of employment of lawyers providing services to the entity and not an arrangement in which a
lawyer agrees to pay a third party for referring other clients to the lawyer. Consequently the Federal
Program does not involve a lawyer's payment to a non-lawyer for referring clients in violation of Rule
7.03(b).

The Texas Disciplinary Rules of Professional Conduct do not prohibit a Texas lawyer from
participating in a federal government program that is administered by an agency that is part of the
Executive Branch of the United States Government, that refers departments and agencies of the
Executive Branch of the United States Government to lawyers who participate in the program, and that
requires each participating lawyer to pay to the administering federal agency a fee equal to one percent
of legal fees received by the lawyer under the program.

The Supreme Court of Texas
Professional Ethics Committee
Opinion Number 561
August 2005

May a lawyer pay a fee to be listed on a privately sponsored internet site which obtains information over the internet from potential clients about their legal problems and forwards the information to one or more lawyers who have paid to be listed on the internet site?

A lawyer is considering participating in, registering with and/or subscribing to a privately owned for-profit internet service (the "Internet Service") that encourages lawyers and law firms to list their names and areas of practice so that the Internet Service can assist consumers who desire legal assistance to connect with lawyers who might be available to represent such individuals. The Internet Service charges participating lawyers a fixed monthly or annual fee to subscribe and be listed on the Internet Service. The Internet Service does not receive any share of legal fees that may be generated by a lawyer who is retained as a result of being listed with the Internet Service.

A consumer who desires to utilize the service typically fills out a form on the web page for the Internet Service. The form asks for basic information such as name, address, telephone number, date of incident, and a description of the problem for which the person is seeking legal assistance. The Internet Service then emails the consumer's information to one or more lawyers who have registered with or subscribed to the service so that the lawyer or lawyers can contact the consumer. The Internet Service is not involved in any way in a participating lawyer's providing legal services to a consumer.

The Texas Disciplinary Rules of Professional Conduct (the "Rules") contain provisions dealing with advertisements in the public media and participation in lawyer referral services. Effective June 1, 2005, the Rules affecting communications and advertisements pertaining to a lawyer's services were amended. The following portions of the Rules (as amended) are relevant to this opinion:

"Rule 7.03 Prohibited Solicitations and Payments
....
(b) A lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed to practice law for soliciting prospective clients for, or referring clients or prospective clients to, any lawyer or firm, except that a lawyer may pay reasonable fees for advertising and public relations services rendered in accordance with this Rule and may pay the usual charges of a lawyer referral service that meets the requirements of Occupational Code Title 5, Subtitle B, Chapter 952.

"Rule 7.04 Advertisements in the Public Media
(a) A lawyer shall not advertise in the public media by stating that the lawyer is a specialist, except as permitted under Rule 7.04(b) or as follows:
....
(2) A lawyer may permit his or her name to be listed in lawyer referral service offices that meet the requirements of Occupational Code Title 5, Subtitle B, Chapter 952, according to the areas of law in which the lawyer will accept referrals.
(3) A lawyer available to practice in a particular area of law or legal service may distribute to other lawyers and publish in legal directories and legal newspapers (whether written or electronic) a listing or an announcement of such availability. The listing shall not contain a false or misleading representation of special competence or experience, but may contain the kind of information that traditionally has been included in such publications.
....
(d) Subject to the requirements of Rules 7.02 and 7.03 and of paragraphs (a), (b), and (c) of this Rule, a lawyer may, either directly or through a public relations or advertising representative, advertise services in the public media, such as (but not limited to) a telephone directory, legal directory, newspaper or other periodical, outdoor display, radio, television, the internet, or electronic or digital media.
....
(n) A lawyer shall not include in any advertisement in the public media the lawyer's association with a lawyer referral service unless the lawyer knows or reasonably believes that the lawyer referral service meets the requirements of Occupational Code Title 5, Subtitle B, Chapter 952.
...."

(a) A lawyer shall not accept or continue employment in a matter when that employment was procured by conduct prohibited by any of Rules 7.01 through 7.05, 8.04(a)(2), or 8.04(a)(9), engaged in by that lawyer personally or by any other person whom the lawyer ordered, encouraged, or knowingly permitted to engage in such conduct.
...."

Rules 7.03 and 7.04 permit a lawyer to pay reasonable fees for advertising and public relations services rendered in accordance with the Rules. Such services, including advertising in public media such as newspapers, telephone directories, or legal directories, do not violate the prohibition in Rule 7.03(b) against paying, giving, or offering to pay or give anything of value to a person not licensed to practice law for soliciting prospective clients. Rule 7.03(b) also provides that a lawyer "may pay the usual charges of a lawyer referral service that meets the requirements of" chapter 952 of subtitle B of title 5 of the Texas Occupations Code, which is known as the Texas Lawyer Referral Service Quality Assurance Act (the "Texas Lawyer Referral Act").

Under section 952.002 of the Texas Lawyer Referral Act, a lawyer referral service is defined to be "... a person or the service provided by the person that refers potential clients to lawyers regardless of whether the person uses the term "referral service" to describe the service provided." A person may not operate a lawyer referral service in Texas unless such person obtains a certificate from the State Bar of Texas. Section 952.101 of the Texas Lawyer Referral Act. To obtain a certificate, the lawyer referral service must, among other requirements, be operated either by a governmental entity or a non-profit entity. Section 952.102 of the Texas Lawyer Referral Act. The Internet Service is not a lawyer referral service meeting the requirements of the Texas Lawyer Referral Act because it is a privately owned, for-profit organization that is not eligible to obtain the required certificate.

Rule 7.03(b) prohibits the payment of a fee by a lawyer to a non-lawyer for soliciting or referring prospective clients to the lawyer but allows payments for advertising and public relations services rendered in accordance with the Rule. In this case, the Internet Service provides lawyers and law firms with an opportunity, in return for payment of a fee, to list their names and areas of practice with the Internet Service so that consumers with legal problems can be connected with lawyers who might be available to represent such individuals. The Internet Service collects information on the internet from a consumer and that person's information and legal issues are then conveyed by the Internet Service to one or more of the lawyers who have registered with or subscribed to the Internet Service by paying a fee. The services provided by the Internet Service are not advertising or public relations services as allowed by Rule 7.03(b). The Internet Service is instead a service to solicit or refer prospective clients to subscribing lawyers who have paid a fee, and it is thus an arrangement prohibited by Rule 7.03(b).

A defining characteristic of soliciting or referring prospective clients is to ascertain information about a person's legal needs and then match or connect such person with a lawyer who has experience in the area of law appropriate to the legal problem. In general, if an internet site merely provides information about participating lawyers from which a consumer chooses a lawyer or group of lawyers based on the consumer's consideration or evaluation of that information, the site does not solicit or refer prospective clients but rather advertises for the lawyers listed. On the other hand, if an internet site is using information about participating lawyers for the purpose of identifying or selecting a lawyer or group of lawyers whose names are then suggested, offered or recommended to a consumer for consideration, the site is not advertising or providing public relations services but is rather soliciting or referring prospective clients.

Under the Texas Disciplinary Rules of Professional Conduct, a lawyer may not pay a fee to be listed on a privately sponsored internet site which obtains information over the internet from potential clients about their legal problems and forwards the information to one or more lawyers who have paid to be listed on the internet site.

MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS

ETHICS DOCKET 05-11

PARTICIPATION IN FOR-PROFIT REFERRAL ORGANIZATION WITH NON-ATTORNEYS

You state that you have been approached by a networking and referral organization. This organization has multiple chapters around the world. Each chapter consists of various professionals and business people who seek to obtain referrals and learn marketing techniques. Only one person from any given profession or line of business can join any individual chapter. The particular chapter that has approached you includes, among others, a beauty consultant, heating and air conditioning contractor, investment advisor, and AFLAC insurance agent.

The chapters hold weekly meetings. At these meetings, there is usually a general presentation on how to better market your business. A chapter officer may also draw attention to other seminars that are taking place in the area that address marketing techniques. This is followed by a detailed presentation by one member educating the others about his or her business. Finally, at the end of the meeting, members exchange referrals they have obtained for each other (if any) during the course of the past week.

The referral organization is a for profit entity. It earns its revenue through annual membership fees paid by each member. The members do not pay fees to each other and the organization does not make any referrals. You characterize the organization’s role as helping to bring people together to make “free referrals among themselves.”

You further state that there is no requirement that you provide referrals to other members, or that you obtain referrals from them. You write that it is “theoretically possible to join a chapter only for the various educational programs they provide.” The organization has no quotas and there are no “quid pro quo referrals.”

You ask whether participation in this organization would violate Rule 1.7, 5.4 or 7.2 and, if not, are there any limits on the extent to which you would be permitted to participate. In the Committee’s judgment, participation in this organization would violate the current Rules of Professional Conduct.

As you acknowledge in your inquiry, we have opined many times before on referral arrangements with non-lawyers. See, e.g., Ethics Docket 87-17, 88-65, 90-46, 95-11, 96-17, 00-34, 00-35, 00-40. This Committee has looked with disfavor on referral arrangements with non-lawyers.

In our judgment, the arrangement offered by this organization presents the same ethical concerns we encountered in those previous opinions. Arrangements of this nature create undisclosed conflicts of interest, compromise an attorney’s professional independence and risk violation of the rule prohibiting in-person solicitation.

You have not provided this Committee with a copy of the organization’s rules, but an examination of the web site suggests the pitfalls are serious. Furthermore, our examination of ethics opinions from sister states involving this, or a remarkably similar, organization reinforces our concerns.

We begin our analysis with information contained on the organization’s web site. The organization advises that membership is desirable because:

Belonging to [our organization] is like having dozens of sales people working for you because all of them carry several copies of your business cards around with them.

When they meet someone who could use your products or services, they hand out your card and recommend you. It’s as simple as that! It’s simple because it's based on a proven concept by [the organization’s founder . . . called “givers gain.” If I give you business you’ll give me business and we’ll both benefit as a result.

There is an asterisk in this blurb which directs the reader to the following caveat:

Note, some professions, specifically attorneys and certain health care professionals, may not be permitted to seek direct referrals through in-person solicitation through the use of business cards pursuant to their ethical code. Members of [the organization] that belong to these professions are directed to follow their profession’s own ethical guidelines.

The organization clearly contemplates that members will pass around the business cards of others. For non-lawyers, this is of no concern. For lawyers, however, the prime, advertised objective of this organization raises a serious concern. Rule 7.3 prohibits in-person solicitation of clients.¹

In Ethics Docket 98-30, we stated “that the distribution of business cards [through another] when such distribution is performed manually (as opposed to by mailing) constitutes ‘in person contact with a prospective client’ and that such contact is improper.”

We also found in that opinion that, contrary to the inquirer’s suggestion, the proposed practice violated Rule 7.2(c) because it involved the exchange of something of value. Rule 7.2(c) provides:

[a] lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written communication permitted by this Rule and may pay the usual charges of a not-for-profit lawyer referral service or other legal service organization.

In that opinion, the inquirer and a bail bondsman proposed laminating their business cards back-to-back for distribution. The Committee reasoned that the proposed practice involved an implicit “quid pro quo.”

The Committee believes that the conjoining of the cards amounts to an agreement to the effect of “You distribute my cards, and I’ll distribute yours.” Thus, by distributing the bail-bondsman's cards you would be giving something of value in exchange for his commitment to distribute your cards. While the Rule would not prohibit you from recommending the bail-bondsman and does not prohibit him from gratuitously recommending you, your commitment to use such back-to-back cards in exchange for his use of such cards is not permitted by the Rule.

Although the organization you propose to join does not go so far as to laminate business cards back-to-back, it clearly promotes the concept of “You distribute my cards, and I’ll distribute yours.” The Committee finds that this presents the implicit quid pro quo we rejected in Ethics Docket 98-30.

Nor is the Committee persuaded that attorneys can carve out a separate, ethically compliant, niche for themselves in this organization. Although the organization’s web site advises lawyers that they are directed to follow their profession’s own ethical guidelines, the Committee is not naive.
Participation in this organization is intended to harness the efforts of others to market your legal services. The possibility of joining solely for the educational benefits strikes the Committee as purely “theoretical.”

The Committee is concerned, too, by what it has read regarding this, or a highly similar, organization in the opinions of ethics committees from other states. For example, in Formal Opinion 2004-175 of the Oregon State Bar, the Committee considered the ethical propriety of lawyer participation in an association whose “stated purpose is the exchange of business referrals between members.” The Committee noted that the organization stressed the importance of attendance at monthly meetings and that making referrals was a condition of maintaining membership. However, the Oregon Committee observed that the Association’s rules “acknowledge that the formal standards of ethics of a profession supersede any Association rules.” The Oregon Ethics Committee was not persuaded by this verbal sleight of hand. It found that membership implicitly required the exchange of something for value for referrals. “[S]ubstance must rule over form and a lawyer cannot join a group such as the Association on the premise that the rules are suspended for lawyers if, in fact, the referral requirements are a condition of membership.” The Oregon Committee also expressed the concern that even if the group did not require reciprocal referrals, contacts made by attorneys to referred clients could violate the prohibition on in-person solicitation.

Similarly, the New York State Bar Association’s Committee on Professional Ethics concluded that a lawyer could not participate in an organization such as that described by you. See, Ethics Opinion 741. As here, that Association required participants to attend regular meetings. The organization’s rules provided: “Participants are required to bring bona-fide referrals and/or visitors to their chapter.” The rules also provided: “I will take responsibility for following up on the referrals I receive.” The organization’s materials stated that belonging was “like having dozens of sales people working for you because all the other members carry several copies of your business card around with them. When they meet someone new who could use your products or services they hand your card out and recommend your services.” The New York Committee found, as we have found here, that membership in the organization compromised the lawyer’s independence, risked in-person solicitation, and potentially created undisclosed conflicts of interest.

The Committee is mindful that on February 8, 2005, the Court of Appeals adopted amendments to the Rules of Professional Conduct which take effect on July 1, 2005. Rule 7.2 has been amended to read, in relevant part:

Rule 7.2 Advertising

In the Committee’s judgment, the application of the new rule would not cure the multiple defects posed by this arrangement. The risk of a conflict of interest is unchanged. The risk of in-person² solicitation also would be undiminished. Accordingly, we conclude that both under the present and revised rules the referral arrangement you propose is not permissible.

REFERENCES:
Maryland Rules of Professional Conduct : Rules 1.7, 1.8, 5.4, 7.2 , 7.3
Ethics Opinions: Ethics Docket 87-17, 88-65, 90-46, 95-11, 96-17, 98-30, 00-34, 00-35, 00-40
Oregon State Bar, Formal Opinion 2004-175
New York State Bar Association, Committee on Professional Ethics, Ethics Opinion 741

An Internet company called Legal Match.com (hereinafter LM.com) has solicited the inquiring attorney’s law firm to advertise the law firm’s services on its website. LM.com provided the inquiring attorney with a description of its website and services. According to that description, LM.com’s services are described as follows:

The inquiring attorney asks whether the proposed arrangement with LM.com complies with the Rhode Island Rules of Professional Conduct.

The Panel concludes that (a) the annual membership fee represents the reasonable costs of advertising permitted by rule 7.2(c); (b) the arrangement is not a referral service; (c) payment of the annual fee to LM.com is not impermissible fee-sharing with a nonlawyer; and (d) a participating lawyer’s reply to a consumer’s request for legal services is not a prohibited solicitation. The Panel concludes that the proposed arrangement with LM.com is permissible under the Rules of Professional Conduct.

Rule 5.4(a) and Rule 7.2(c) are pertinent to this inquiry. With three narrow exceptions which have no relevance to this inquiry, Rule 5.4(a) prohibits lawyers from sharing fees with nonlawyers. Rule 7.2 (c) states: (c) A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written communication permitted by this rule and may pay the usual charges of a not-for-profit lawyer referral service or otherlegal service organization.

In Ethics Advisory Panel Opinion 2004-4, the Panel advised a lawyer that it was ethically impermissible to advertise on a company’s drunk-driving defense Internet site. The strategy of the on-line company was to enlist one drunk-driving defense attorney from each state who would receive legal work from potential clients using the website. The company had solicited the inquiring lawyer to be the exclusive drunk-driving defense attorney for the State of Rhode Island. Under the plan, a participating attorney would pay the company an initial setup fee, plus a $15,000 consulting fee for every $100,000 the attorney received in gross fees as a result of e-mail and telephone communications generated through the website.

The Panel concluded that the arrangement violated Rule 7.2(c) in that the $15,000 consulting fees were payments for recommending a lawyer’s services. The Panel also concluded that the arrangement violated Rule 5.4(a) because participating attorneys shared fees generated through the website with the on-line company, a nonlawyer. Turning to the instant inquiry, the Panel is of the opinion that the arrangement with
LM.com is permissible. The arrangement with LM.com is not an impermissible feesharing with a nonlawyer under Rule 5.4(a). A participating attorney pays an annual membership to LM.com. The fee to LM.com is a flat fee which buys advertising and access to requests for legal services posted by consumers. Unlike the fees in Ethics Advisory Opinion No. 2000-04, the annual fee is not a percentage of, or otherwise linked to, a participating attorney’s legal fees.

The proposed arrangement is not a referral service. LM.com does not recommend, refer, or electronically direct consumers, i.e. potential clients, to a specific attorney; and all requests for legal services by consumers are accessible to every attorney who registers to receive them. After viewing the various advertisements on the website, or upon receiving a lawyer’s reply to a request for legal services, a consumer contacts a participating attorney directly. Attorney-client relationships are established off-line and without LM.com’s participation. On the basis of these facts therefore, the annual membership fee does not appear to the Panel to be a payment “for recommending the lawyer’s services” prohibited by Rule 7.2(c).

Indeed, the Panel believes that the annual membership fee to LM.com represents the reasonable costs of advertising which Rule 7.2(c) permits. Of course, in posting a profile page on the LM.com website, the inquiring attorney must comply with the various advertising rules set forth in other provisions of Rule 7. See e.g. Rule 7.1 (communications about lawyer’s services must not be false or misleading); Rule 7.2 (copies to be filed with disciplinary counsel; communication to include name of at least one lawyer responsible for content; lawyer to disclose whether cases are referred to other lawyers and whether client pays costs if case is taken on “no recovery – no fee” basis. Rule 7.4 (communications relating to fields of practice); Rule 7.5 (firm names and trade names).

Finally, the Panel does not believe that participating attorneys violate Rule 7.3 when they reply to consumers’ on-line requests for legal services. The request for legal services is initiated by the client, and the participating lawyer’s reply is not a prohibited solicitation under Rule 7.3.

Based on the information submitted by the inquiring attorney, the panel concludes that (a) the annual membership fee represents the reasonable costs of advertising permitted by rule 7.2(c); (b) and the arrangement is not a referral service; (c) payment of the annual fee to LM.com is not impermissible fee-sharing with a nonlawyer; and (d) a participating lawyer’s reply to a consumer’s on-line request for legal services is not a prohibited solicitation. The Panel concludes that the proposed arrangement with LM.com is permissible under the Rules of Professional Conduct.

Rule 1.5(f) requires a lawyer who has a fee dispute with a client to participate in the State Bar's program of fee dispute resolution. How does the guarantee relate to this requirement?

Opinion #2:

The guarantee may not interfere with a lawyer's compliance with the requirements of Rule 1.5(f) to notify a client of the State Bar's fee dispute resolution program and, if the client so requests, to participate in good faith. If the company's guarantee provides a duplicative dispute resolution procedure, it is only beneficial for clients.

FORMAL OPINION NO. 2004-175
Advertising and Solicitation:
Lawyer Membership in Business Referral Clubs

Lawyer A has been asked to join the local chapter of a business and professional “networking association” (the “Association”). According to its published policies, the purpose of the Association is to facilitate referral of business between members. Attendance at monthly meetings is emphasized and making referrals is a condition of maintaining membership. Members also must follow up on referrals received through the Association, although the Association’s rules acknowledge that the formal standards of ethics of a profession supersede any Association rules.

A lawyer shall not . . . compensate or give anything of value to a person or organization to promote, recommend or secure employment by a client, or as a reward for having made a recommendation resulting in employment by a client. . . .

A lawyer shall not refer a client to a nonlawyer with the understanding that the lawyer will receive a fee, commission, or anything of value in exchange for the referral, but a lawyer may accept gifts in the ordinary course of social or business hospitality.

Participation in the activities of the Association in accordance with its stated policies would violate both of those rules. The stated purpose of the Association is the exchange of business referrals between members. A business referral is a thing of value. If Lawyer A commits to refer Lawyer A’s clients to Association members, then in making the referrals Lawyer A is giving something of value in exchange for the other member to promote, recommend, or secure Lawyer A’s employment. This exchange violates DR 2-103(A). OSB Legal Ethics Op No 1991-2 similarly concludes that a lawyer cannot ethically enter into an agreement for reciprocal referrals between a lawyer and a trust company because the quid pro quo nature of the arrangement would violate DR 2-103(A).

Moreover, if other Association members promise to refer clients to Lawyer A, then Lawyer A will receive something of value in exchange for making referrals of Lawyer A’s own clients to other members of the Association. This exchange violates DR 2-105.

Business development is a fact of life for modern professionals and the disciplinary rules do not prohibit participation in groups at which lawyers can network and learn about business opportunities. Many civic groups limit membership to one person in an occupation or profession and facilitate networking. The disciplinary rules do not prohibit participation in those groups unless making the referral is a condition of membership and continued participation. Moreover, substance must rule over form and a lawyer cannot join a group such as the Association on the premise that the rules are suspended for lawyers if, in fact, the referral requirements are a condition of membership.

Even in a group that does not require reciprocal referrals, lawyers must be careful that their follow-up on any referrals received is consistent with the disciplinary rules. DR 2-104 prohibits a lawyer from initiating personal contact with a prospective client except in limited circumstances:

(1) If the prospective client is a close friend, relative, former client, or one whom the lawyer reasonably believes to be a client; (2) Under the auspices of a public or charitable legal services organization; or

(3) Under the auspices of a bona fide political, social, civic, fraternal, employee, or trade organization whose purposes include but are not limited to providing or recommending legal services, if the legal services are related to the principal purposes of the organization.

The Association’s activities do not fall within any of the exceptions set forth in DR 2-104(A). Accordingly, regardless of the nature of the networking group, Lawyer A cannot initiate any personal follow-up except in writing—unless the person making the referral states that he or she has been expressly authorized by the prospective client to have the lawyer contact the prospective client. See OSB Legal Ethics Op No 1991-100. Cf. In re Blaylock, 328 Or 409, 978 P2d 381 (1999) (lawyer did not initiate contact with prospective client when he acted on goodfaith belief that third party was conveying prospective client’s request for contact). Moreover, if Lawyer A knows that the potential client is in need of legal services in a particular matter, DR 2-101(C) requires that the written communication be clearly and conspicuously identified as an advertisement unless it is apparent from the context that it is an advertisement.